1-1     By:  Nixon                                            S.J.R. No. 14

 1-2           (In the Senate - Filed January 15, 1997; January 16, 1997,

 1-3     read first time and referred to Committee on State Affairs;

 1-4     March 19, 1997, reported adversely, with favorable Committee

 1-5     Substitute; March 26, 1997, recommitted to Committee on State

 1-6     Affairs; April 4, 1997, reported adversely, with favorable

 1-7     Committee Substitute by the following vote:  Yeas 13, Nays 0;

 1-8     April 4, 1997, sent to printer.)

 1-9     COMMITTEE SUBSTITUTE FOR S.J.R. No. 14                   By:  Nixon

1-10                           SENATE JOINT RESOLUTION

1-11     proposing a constitutional amendment authorizing a voluntary,

1-12     consensual encumbrance on a business homestead for the purpose of

1-13     an equity loan.

1-14           BE IT RESOLVED BY THE LEGISLATURE OF THE STATE OF TEXAS:

1-15           SECTION 1.  Section 50, Article XVI, Texas Constitution, is

1-16     amended to read as follows:

1-17           Sec. 50.  (a)  The homestead of a family, or of a single

1-18     adult person, shall be, and is hereby protected from forced sale,

1-19     for the payment of all debts except for:

1-20                 (1)  the purchase money thereof, or a part of such

1-21     purchase money;

1-22                 (2)[,]  the taxes due thereon;

1-23                 (3)[,]  an owelty of partition imposed against the

1-24     entirety of the property by a court order or by a written agreement

1-25     of the parties to the partition, including a debt of one spouse in

1-26     favor of the other spouse resulting from a division or an award of

1-27     a family homestead in a divorce proceeding;

1-28                 (4)[,]  the refinance of a lien against a homestead,

1-29     including a federal tax lien resulting from the tax debt of both

1-30     spouses, if the homestead is a family homestead, or from the tax

1-31     debt of the owner;

1-32                 (5)[, or for] work and material used in constructing

1-33     improvements thereon, if [and in this last case only when] the work

1-34     and material are contracted for in writing, with the consent of

1-35     both spouses, in the case of a family homestead, given in the same

1-36     manner as is required in making a sale and conveyance of the

1-37     homestead; or

1-38                 (6)  an equity loan on a business homestead as provided

1-39     by Section 50a of this article.

1-40           (b)  The [nor may the] owner or claimant of the property

1-41     claimed as homestead, if married, may not sell or abandon the

1-42     homestead without the consent of the other spouse, given in such

1-43     manner as may be prescribed by law.

1-44           (c)  No mortgage, trust deed, or other lien on the homestead

1-45     shall ever be valid, except for a debt described by this section,

1-46     whether such mortgage, or trust deed, or other lien, shall have

1-47     been created by the owner alone, or together with his or her

1-48     spouse, in case the owner is married.  All pretended sales of the

1-49     homestead involving any condition of defeasance shall be void.  A

1-50     purchaser or lender for value without actual knowledge may

1-51     conclusively rely on an affidavit that designates other property as

1-52     the homestead of the affiant and that states that the property to

1-53     be conveyed or encumbered is not the homestead of the affiant.

1-54           SECTION 2.  Article XVI, Texas Constitution, is amended by

1-55     adding Section 50a to read as follows:

1-56           Sec. 50a.  (a)  An equity loan may not be secured by a

1-57     homestead other than a business homestead.  A lender may not

1-58     require or accept a borrower's homestead, regardless of whether the

1-59     homestead was previously encumbered by an existing equity loan, as

1-60     collateral on a debt not described by Section 50(a) of this

1-61     article.

1-62           (b)  A lender may not accelerate the remaining payments of an

1-63     equity loan or demand payment of the loan in full because of a

1-64     decrease in the market value of the business homestead securing the

 2-1     equity loan, unless the decrease in the market value is caused by

 2-2     substantial damage or destruction to the homestead, a condemnation

 2-3     or other taking of the homestead, the discovery of an environmental

 2-4     hazard on the homestead, or the use of the homestead in a manner

 2-5     that constitutes waste on the homestead or a nuisance.  This

 2-6     section does not prohibit a lender, if permitted by the loan

 2-7     documents, from refusing to make additional advances under an

 2-8     equity loan if the value of the homestead decreases, regardless of

 2-9     the cause of the decrease.

2-10           (c)  A lender may not accelerate the remaining payments of an

2-11     equity loan or demand payment of the loan in full because of the

2-12     borrower's default under any other indebtedness not secured by a

2-13     prior valid encumbrance on the business homestead, regardless of

2-14     whether the indebtedness is owed to the lender.  This section does

2-15     not prohibit a lender, if permitted by the loan documents, from

2-16     refusing to make additional advances under an equity loan if the

2-17     borrower has defaulted in the performance or payment of another

2-18     indebtedness owed to the lender or another creditor.

2-19           (d)  The principal amount of an equity loan plus the

2-20     aggregate total of the outstanding balances of other indebtedness

2-21     secured by valid encumbrances of record against the business

2-22     homestead may not exceed 90 percent of the fair market value of the

2-23     homestead on the date the equity loan is made.

2-24           (e)  In this section:

2-25                 (1)  "Business homestead" means a homestead used

2-26     exclusively for business purposes.  This term does not include

2-27     homestead property designated for agricultural use as provided by

2-28     Subchapter C, Chapter 23, Tax Code.

2-29                 (2)  "Equity loan" means a loan made for a purpose

2-30     other than a purpose listed in Section 50(a)(1)-(5) of this

2-31     article.

2-32           SECTION 3.  The following temporary provision is added to the

2-33     Texas Constitution:

2-34           TEMPORARY PROVISION.  (a)  This temporary provision applies

2-35     to the constitutional amendment proposed by the 75th Legislature,

2-36     Regular Session, 1997, authorizing a voluntary, consensual

2-37     encumbrance on a business homestead.

2-38           (b)  The constitutional amendment takes effect May 1, 1998.

2-39           (c)  This temporary provision takes effect on the adoption of

2-40     the amendment by the voters and expires May 2, 1998.

2-41           SECTION 4.  This proposed constitutional amendment shall be

2-42     submitted to the voters at an election to be held November 4, 1997.

2-43     The ballot shall be printed to permit voting for or against the

2-44     proposition:  "The constitutional amendment extending homeowners'

2-45     rights to borrow voluntarily against the equity in and establish a

2-46     valid lien on their business homesteads."

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